The competition intensity in the telecom industry has led to frequent tariff cuts, eroding operator margins. The debt-laden operators have been reporting quarter-on-quarter losses for the past couple of years, making it extremely difficult to raise fresh funds for further expansion.

Now, however, the sector seems to be limping back to normalcy. In the quarter ended June 30, 2013, Bharti Airtel, Idea Cellular and Reliance Communications (RCOM) have shown some improvement in their profit margins and in key parameters such as revenue per minute, ARPUs, and even minutes of usage. According to analysts, the bigger telecom operators are regaining pricing power.

After the Supreme Court cancelled 122 controversial licences in January 2012, many of the new players exited the market. This helped in reducing the intensity of the competition somewhat.

Over the last year and a half, operators have been increasing tariffs as well as curtailing the free minutes and promotional offers that they were giving earlier. This has helped them increase their revenue per minute realisation.

Further, for the last six months, operators have been aggressively pushing their data and 3G plans. Bharti Airtel, Vodafone India, RCOM and Idea have all reported higher data ARPUs as compared to the previous year. Recently, Bharti Airtel, Vodafone and Idea Cellular have significantly raised the rentals of their 2G data plans. This move, they say, will increase their margins further. For Rs 125, Airtel’s Delhi and Mumbai customers will get only 525 MB while for Rs 154, they will get 1 GB of free data. Idea and Vodafone have also made similar changes in their data plans. In contrast, RCOM has reduced its 3G data plan prices to Rs 123 for 1 GB of data.

Nevertheless, tariffs cannot be pushed up beyond a certain level.  To improve margins, operators will have to work on overall cost optimisation and efficiencies.  While the results for the quarter ended June 2013 are an indication of the industry rallying back, policy clarity is required in key areas like mergers and acquisitions, and spectrum re-farming and charges to achieve complete recovery.